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Archive for the ‘minimum wage’ Category

Government bureaucrats think it is their business to prevent individuals from entering voluntary contracts with companies or organizations if the level of compensation does not meet some arbitrary threshold. Congress has used minimum wage laws to prevent certain arrangements, while the Department of Justice has a set of rules detailing when unpaid internships are considered legal.  Naturally, these rules do not apply to government.

At CEI’s Open Market, Brian McGraw points to these rules from the DoJ that won’t apply for the currently advertised unpaid internships at the White House:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Yes, number 4 really does say that it’s legal only for a corporation to use unpaid interns if they are counter-productive. No such restriction will apply for the White House, though, as “Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.”

It is obviously hypocritical for government to restrict the use of unpaid interns for others, while at the same time everyone knows that Washington thrives on the practice. But there is no good reason for these restrictions on anyone. Individuals that enter into unpaid internships do so because they will receive something in return, usually training and experience to add to their resumes, that they value more than their labor. They would not take the position if this were not true. Like most government actions designed to protect people from themselves, prohibiting individuals from entering into voluntary unpaid internships actually harms them by limiting their opportunities.

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Anybody with an IQ above room temperature understands that companies only hire workers when they expect to generate net revenue (i.e., the total receipts associated with a new worker are expected to be higher than the total costs). That’s why it was so reprehensible for Congress to approve a 40-percent hike in the minimum wage – a step that was guaranteed to kill jobs. The Wall Street Journal’s editorial page reports on new research showing 100,000-plus jobs were wiped out. This awful legislation was approved in 2007, and all politicians associated with that choice should be ashamed of themselves.

Economic slowdowns are tough on many job-seekers, but they’re especially hard on the young and inexperienced, whose job prospects have suffered tremendously from Washington’s ill-advised attempts to put a floor under wages. In a new paper published by the Employment Policies Institute, labor economists William Even of Miami University in Ohio and David Macpherson of Trinity University in Texas find a significant drop in teen employment as a direct result of the minimum wage hikes.

The wage hikes were implemented in three stages between 2007 and 2009, and not all states were affected because some already mandated a minimum wage above the federal requirement. But for the 19 states affected by all three stages of the federal wage increase, “there was a 6.9% decline in employment for teens aged 16 to 19,” write the authors. And for those who had not completed high school, “we estimated that the hikes reduced employment by 12.4%,” which translates to about 98,000 fewer teens in the work force.

After isolating for other economic factors and broadening their analysis to include all 32 states affected by any stage of the federal wage increase, the authors conclude that “the federal minimum-wage hikes reduced teen employment by 2.5% translating to approximately 114,400 fewer employed teens.”

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Our latest Econ 101 video is a must watch.  If you haven’t seen it yet, Orphe Divounguy succinctly explains the role of minimum wage laws in creating unemployment in this video titled, “The Job-Killing Impact of Minimum Wage Laws:”

Minimum wage laws seem like a good idea, but arbitrarily mandating a certain wage can have terrible consequences. Business are not charities, so if the minimum wage is set above the market level, this eliminates job opportunities – particularly for the less fortunate members of society. Since employees and employers should have freedom of contract, the right minimum wage is zero.

Our other videos in the Economics 101 series are available here.

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Ever wonder why unions care so much about the minimum wage when almost all union members get paid above that level? The answer is simply, but sleazy. As Walter Williams explains, they want to protect their high-pay status by increasing the cost of lower-skilled workers. For all intents and purposes, they are pricing poor people out of the job market:

Labor unions are the major supporters of increases in the minimum wage. Even though the overwhelming majority of their members earn multiples of the minimum wage, they spend millions upon millions lobbying for minimum wage increases. They do it because higher minimum wages protect their members from competition with low-skill, low-wage workers. Most other minimum wage supporters are decent people with a concern for low-wage workers, but their actions suffer from a misguided vision of how the world operates.
http://townhall.com/columnists/WalterEWilliams/2010/05/26/minimum_wage_cruelty_update

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